Economic value (EV) measures
Regulatory Definition
Measures of changes in the net present value of the interest rate sensitive instruments over their remaining life resulting from interest rate movements. EV measures reflect changes in value over the remaining life of the interest rate sensitive instruments, i.e. until all positions have run off.
EBA GL/2022/14
What This Actually Means
Discount all your future asset and liability cashflows to today's value, then shock the rates and see how much that value changes. It captures the full lifetime impact of a rate move — not just this year's P&L but the present value of every future cashflow.
Where It Matters
This is the 'balance sheet truth' metric. It reveals economic exposures that earnings measures hide. A bank can show stable NII for years while its economic value is being eroded by duration mismatches. Regulators increasingly emphasise EV alongside earnings.
The net present value of all future banking book cashflows.